The scene is much like any other modern office: an open-plan work space crammed with desks, telephones and computers.

But there's one big difference. The word 'Microsoft' is nowhere in sight.

Instead, computers here now use the Linux operating system. It has many similar functions to Microsoft's Windows - but unlike Windows, it is available for free.

Increasingly, Brazil's government ministries and state-run enterprises are abandoning Windows in favour of 'open-source' or 'free' software, like Linux.

Money saving

"The number one reason for this change is economic," says Sergio Amadeu, who runs the government's National Institute for Information Technology.

He explains that, for every workstation, the government is currently paying Microsoft fees of around 1200 Brazilian reais ($500; £270).

"If you switch to open source software, you pay less in royalties to foreign companies," explains Amadeu. "And that can count for a lot in a country like Brazil, which still has a long way to develop in the IT sector."

I think free software will encourage Mr Gates to reinvent his business

Jose Luiz de Cerqueira Cesar Global Organisation for Free Software

Overall, the government reckons it could save around $120m a year by switching from Windows to open-source alternatives.

President Luiz Inacio Lula da Silva is studying a draft decree which, if approved, would make the change compulsory for federal departments.

Global development issue

For Mr da Silva, this is a vital development issue in a country where nine out of ten people have never used the internet.

Through tax breaks, his government is subsidising the sale of computers to low-income families. For as little as $550, paid in instalments, they can buy a basic machine which operates using open-source software.

"Open-source alternatives are a great opportunity for developing countries," says Jose Luiz de Cerqueira Cesar, head of IT at Banco do Brasil. "If computer users within a geographical region pool their expertise, they can develop software that is perfectly suited to their needs."

Mr Cerqueira Cesar is a leading light behind the newly-created "Global Organisation for Free Software," which has been set up by a broad coalition of Brazilian businesses and NGOs. More details are being released this week at an International Forum on Free Software, in the Brazilian city of Porto Alegre.

The aim of the new organisation is to encourage greater cooperation and the sharing of ideas among governments, businesses and individuals within the developing world.

On a smaller scale, that is already happening in Brazil, which has seen some ingenious attempts to span the so-called "digital divide" between the developed and developing worlds.

Computers in the favelas

One successful example is the "Recycling Goal" project, which extends computer technology into the shanty-towns or "favelas" on the outskirts of Sao Paulo.

When all the costs and benefits are taken together, we think Microsoft offers the best value

Microsoft Brazil

"We have 80 computers here, all donated by Brazilian businesses," says the project organiser, Dalton Martins. Around him, children and teenagers from the Sacadura Cabral favela are tapping away on brightly-painted keyboards.

Dalton explains that open-source software is an essential to the project: partly because it drastically reduces costs; and partly because it can be modified to suit local needs.

"We use Linux," he says, "which means we've been able to customise the graphics and language content. Life has a special reality here, and we need to build technology that works for the community."

Dalton adds that Windows does not offer the same level of flexibility, because its source code - the raw material of a program or operating system - is kept secret.

Microsoft fights back

So what does Microsoft's founder, and the world's richest man, make of this challenge?

For Lula, free software is a development issue

On the face of it, Bill Gates does not have much to worry about. More than 90% of the world's personal computers still use the Windows operating system.

But there are signs of nerves. In January, Mr Gates unsuccessfully sought a private meeting with President Lula at the World Economic Forum in Davos, Switzerland.

In a written statement, Microsoft's Brazil office told the BBC:

"We strongly believe that governments and computer users should be free to choose whichever software and other technology best meets their needs. But when all the costs and benefits are taken together, we think Microsoft offers the best value."

The statement adds that open-source software can entail hidden costs, for features over and above the basic operating package. Microsoft executives have also questioned the security of software whose source code is freely available.

To back up its value-for-money pledge, Microsoft recently launched a stripped-down, cheaper version of Windows XP in Brazil. And in April it announced a new credit deal for companies investing in Windows software, in partnership with Bradesco Bank.

But the corporation's battle with Brazil is only just beginning.

UN Battle

The government here has its eye on a UN summit on information technology, to take place in Tunisia in November.

Already, Brazilian diplomats are pushing for a final declaration that would stress the advantages of open-source software.

They have won the backing of India and are now canvassing broader support from the developing world.

"It would be wrong to portray this as a personal war against Bill Gates," cautions Mr Cerqueira Cesar.

"But I think free software will encourage Mr Gates to reinvent his business. The world of technology is opening up; there are hundreds of thousands of people working to improve free software. The old, closed model must adapt in order to survive."